New Bank Debt Collection Tools
To Lower Bank Chargeoffs and Defaults

The U.S. economy is experiencing a recession, and with growing unemployment, a sluggish real estate market, as more homeowners fall behind on their home loans and face more foreclosures, along with decreasing property values, as well as a credit crunch, consumers are fighting just to stay afloat.

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Because of years of steadily rising consumer debt, banks are facing ever growing credit card delinquencies and defaults, as consumers struggle to pay for the necessities. Financial institutions are trying new strategies to help with bank debt collection efforts.

Here are some suggested bank debt recovery tactics, some of which might help with your bank debt collection as well.

• Offer flexible plans for customers experiencing financial hardship.
• Create "hardship" programs for borrowers who are late with their payments.
• Extend or lower payments, interest rates, or lower fees when you anticipate customer payment problems.
• Create communications channels where customers can openly discuss their issues. By proactively reaching customers early, you can prevent larger problems later.

All banks have a percentage of customers who will go into delinquency, but this economy calls for new measures, as it is affecting even the banks' best customers: those that always pay on time, and keep within safe credit limits. For instance, you might want to pay attention to the customer who suddenly start to pay the minimum balance if they've had a history of paying more than the monthly minimum. It could be a sign of a future problem intensifying.

Another "must-do" for institutions with growing bank debt collection problems is quickly getting rid of, and outsourcing bad debt accounts. If you implement some of the earlier suggested tools, you should be able to identify very early on, and be able to separate the customers that you can work with through payment arrangements from the more problem customers. These problem accounts need to be identified early in the process, and handed over to an outside collection agency. Failing to do so, not only decreases your likelihood of getting paid on them at all, it costs you far more in time, resources, etc. Debt portfolio scoring is another tool that can help you quickly identify problem accounts before they default.

Benefits To Your Bank

• Demand Deposit Accounts (DDA)- A debt collection agency can recover on those overdrawn demand deposit accounts before they are charged off, thereby helping tremendously with customer retention. For example, by using this strategy, you can improve on your overdraft program, and retain more checking account customers BEFORE charge-off.

• Loans- By implementing a systematic approach to loans (unsecured, secured, student loans, auto, home loans, commercial, credit cards, etc.) means faster and maximum recovery if these are outsourced at a specific interval.

• Automation- Collection agencies specializing in bank debt collection will offer automated online processes to monitor account activity. You should be able to notate partial payments, paid in full's, as well as automatically upload delinquent accounts online effortlessly.

  An added cost benefit is this will free up internal staff considerably from having to handle collection calls, letters, visits, etc., to handle more important banking tasks.

No account should be held in house past 60 days or so, before being turned over to third party collection agencies. 60 days is usually long enough to determine whether you're dealing with a problem account. And the sooner the account is handed over, the better the collection agency's success rate will be to recover at least some of your money.

If your bank or credit union would like a debt collection agency quote, complete the brief form below. One of our consultants will contact you shortly.